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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






2. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






3. The total quantity - or total output of a good produced at each quantity of labor employed






4. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






5. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






6. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






7. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






8. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






9. The mechanism for combining production resources - with existing technology - into finished goods and services






10. All firms maximize profit by producing where MR = MC






11. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






12. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






13. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






14. TR = P * Qd






15. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






16. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






17. ATC = TC/Q = AFC + AVC






18. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






19. Costs that change with the level of output. If output is zero - so are TVCs.






20. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






21. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






22. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






23. Exists at the point where the quantity supplied equals the quantity demanded






24. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






25. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






26. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






27. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






28. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






29. The change in quantity demanded resulting from a change in the price of one good relative to other goods






30. Ei = (%dQd good X)/(%d Income)






31. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






32. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






33. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






34. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






35. A firm that has market power in the factor market (a wage-setter)






36. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






37. Models where firms agree to mutually improve their situation






38. Exists if a producer can produce more of a good than all other producers






39. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






40. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






41. The lost net benefit to society caused by a movement away from the competitive market equilibrium






42. Entry of new firms shifts the cost curves for all firms upward






43. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






44. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






45. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






46. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






47. MUx / Px = MUy/Py or MUx/MUy = Px/Py






48. Ed < 1






49. Entry of new firms shifts the cost curves for all firms downward






50. AFC = TFC/Q